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bigduckontax
bigduckontax, Accountant
Category: Tax
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My gross pension, i.e. state pension and a small teachers pension

Customer Question

My gross pension, i.e. state pension and a small teachers pension is£5877 and in below the uk tax threshold alth liable for tax if income increases.I own my own house, I am 73 and a widow. I live in Spain. Can I still do my tax in the UK or can I do an abbreviated tax declaration in Spain. I have obviously , no savings, not even a car. I would rather do a shortened UK tax form as I do not trust Spanish officials wh managed to lose £40.000 from me and my late husband on the ale of a house.ie they did not put the buyers debt on the registration against the house. Help?
Valerie Spratt
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello Valerie, I am Keith and happy to assist you with your question. Pensions are normally taxed in the country of origin. This is as agreed in the Double Taxation Convention between the UK and Spain. Thus your UK pensions are taxable in the UK then any tax deducted in the UK is allowable as a tax credit against any Spanish taxation due. Providing your tax codes are correct, and you should always check these on issue, then you should be tax neutral at the year end. From what you say in your question with your Personal Allowance of 10.6K you are well below the tax limit anyway. You should approach your UK tax office with a view to making an annual self assessment tax return however I think that HMRC will tell you not to bother as even they do not want to process returns which yield no revenue. If any tax has been deducted then you will need a form R40 to recover this as opposed to the normal return, the SA100. As a final point, did you complete a form P85 when you moved to Spain? If you did not then you should do so immediately. Fortunately there is no time limit, the form is available on the net and can be filed on line. On receipt HMRC will make you non resident for the tax year after departure and furthermore split the leaving year into tow portions, one resident and one non resident. You will find dealing with HMRC far easier if they have your residential status correct. To remain non resident do not spend more than 91 days in the UK in any one tax year. I do hope that I have been able to shed some light on your question for you.
Customer: replied 2 years ago.

Many thanks for your answer. I will sleep tonight. I will fill out the P85 which could prove tricky as Ihave been here for 12 years, but my late husband should have seen to that before he became ill .I will not be spending more than 91 days a year in the UK as you stated

I am so thankful for your help and I will be spreading the news about your help and so quickly.

Thankyou again,

Valerie Spratt

Expert:  bigduckontax replied 2 years ago.

An awful lot of ex pats seem never to have heard of the P85 and it is so useful. As you and your late husband were separate persona for tax purposes you both should have taken P85 action.

Please remember to always check tax codes. HMRC have got mine wrong initially for the last 20 years and I nearly had a heart attack this year:, it was right!

Please be so kind as to rate me before you leave the Just Answer site.

bigduckontax and other Tax Specialists are ready to help you
Customer: replied 2 years ago.

I did look at the P85 and realised that I could not honestly fill it in.We moved to Spain in 2002 and had vast problems , the main one being that the English house sale had not gone thro' and therefore I had to take out a mortgage (being the youngest) on the house in Spain we had 'purchased'; to do that I had to be a resident, I had to get a residentia, which I did plus one for husband.It was very complicated but we did move into the house.

I cannot recall all the money matters etc since that time; he never talked about tax matters. We did have a money advisor whois now in England and I cannot even recall his name. I do know the my husband made some very bad investments. He died and I was left with a debt which I am still paying off (it was converted to a loan).So in reply , I no longer have all the documentation for this long period of time and knowing the ways of Spain ,its better not to muddy the waters.Just this week they put a block on all bank accounts of expats if the bank did not have all the personal details required of that person. Mine was blocked two months ago without explanation; they said iwas not a resident until I produced my Residencia, whichI did ( and they had already copied it to my certain knowledge)

Perhaps you can get the feeling of what expats are going thro'; banks have rights we have never heard of, we now have to fill in \a tax form whoever we are in Spain when I have always filled in and English tax form. The tax form is so complicated that you have to have an accountant, it is 13 pages of Spanish; there is a fine on every day after 30 June if you have not filled one in. The Consulate says we have to fill one in. BUT what they dont tell you is that thereare 3 types of tax form and one is a short taxreturn which I shall fill in. You will not believe me but you get your tax form from the tobacconists shops for a few cents!

So I have decided to continue the HMRC short tax return and do the other for Spain with my pensions being withheld tax pensions.The threshold is very low as well, much lower than in the UK but I presume that as they are withheld tax pensions they cannot , the Spanish, tax me on them.

Its no wonder many expats are thinkgoing back to the UK! I willDo asI have stated ; is that the right way to go ahead? Many thanks for your invaluable help;cannot thank you enouugh. WILL rate you, Val!

Expert:  bigduckontax replied 2 years ago.

Spain sounds like France where tax is complex and so constantly changing that you have to use a local professional. Remember, in France you get your postage stamps from the tobacconist which years ago you could not in the UK. In those days you had to be licenced to sell stamps.

In the 70s my boss retired to Majorca. In those days the Spanish authorities positively endorsed Brit residents as it made for a more stable society. Maybe package holidays have now changed all that!

There are, as I am sure you are aware new rules and a new Convention. For some guidance have a look here:

http://www.telegraph.co.uk/finance/personalfinance/expat-money/10967870/Dont-get-caught-out-by-new-Spain-tax-laws.html

Like all these Double Taxation Conventions they do not protect against differences in tax rates between countries.

I have a Thai wife and had the devil's own job getting her an Entry Clearance to the UK until I complained to my MP of the antics going on the Embassy in Bangkok. I therefore have some idea of the difficulties you may face.

Expert:  bigduckontax replied 2 years ago.

Thank you for your excellent support.

Customer: replied 2 years ago.

Hello Keith,

Things have changed yet again. Thankyou for the Telegraph article which gave me pulpatations!

Went to tobacco shop for form, no you can no longer get them there, you have to go to the Hacienda office which we did.Given a long piece of paper with ringed bits, more or less saying we had to phone for a appointmewnt to hget the taxform and if you are lucky, for half a day a week may get an English speaking assistant.

Walde down the road and lo and behold a solicitors who spoke English. The receptionist who spoke perfect English told us that it was an almost impossible system for those who were not fluent in Spanish, he knew what was happening and said that all the banks were making people take tickets just to conform to the rule which was all ID, He was unable to wait that long himself!

He was aquainted with the problem and just said that by giving all the necessary documents, they could fill in the form and send it off before June30th for about 60 euros. This we are doing.

I will also as you said, check my tax code.

By the way, I realised that I should have looked more carefully, On the state pension I have an additional teachers pension i.e. 2 pensions, one £5,800 approxplus £2,000 Teachers pension.Add to this that we are talking sterling, a whole new light - this converts in euros as a higher figure; I think the lowest banding here is 6,600 euros . I also realised that I am paying off a loan on my late husband and mine, credit card which the bank converted into a loan, is this tax deductable at 100 euro a month?

My teachers pension is written on the back of my state pension and the tax(nil) is determined by my tax code which is given to the T pension. ie both are taxed at source. I presume ypou are tearing your hair out with me by now but I want the solicitor and myself to know

everything correctly.

The depression around here is palpable through lack of knowlege, as the Telegraph said Idid have tax taken from me without me knowing a few months back. I supposed I had better mention that aswell! Many thanks for listening and helping me. You have been excellent!

Thankyou, Val

Expert:  bigduckontax replied 2 years ago.
Sorry Val, the paying off of a loan is not tax deductible under the UK Income Tax regime and we have already determined that you should not be being taxed at all here as your total income falls below the personal allowance, currently 10.6K.
A quick look at the Spanish system indicates that only the following are tax deductible [source, Spainaccountants]::
'Payments to acquire or renovate main residence (Deduccion Vivienda Habitual)
Home owners
This deduction has been abolished completely for properties purchased from 1st January 2013 onwards.
For properties purchased before 1st January 2013, the maximum allowable expenditure is 9,040 Euros and the tax relief is 15%. The following payments are allowable:
Original capital payment to purchase property.
Mortgage interest paid.
Deposit in cuenta vivienda.'
That looks suspiciously like mortgage relief which we used to have in the UK, abolished here long since, disappearing in Spain too by the look of it. From what you are saying though you appear to have had UK Income Tax incorrectly deducted so you will have either to approach HMRC to recover this or use the tax credits thus created to offset your Spanish Tax liability.
Personally I am not that keen on Spain, I prefer Portugal, incidentally our oldest alliance partner going right back to the days of Wellington.
Don't worry about pestering; I know just how life can be in other countries although in Thailand, with its huge tourist industry, things are not too onerous particularly out in the suburbs and we do have a TESCO and Boots, except the former is called Lotus Tesco out there!
Customer: replied 2 years ago.

THey are charging another 45e I thought I could do follow ups as you have seen; obviously I cannot 'pester you', Val

Expert:  bigduckontax replied 2 years ago.
As far as I am aware your follow up attracts no charge. If you are being charged you should take it up with Just Answer administration.